Crony Capitalism Masquerading as Infrastructure Reform

Crony Capitalism Masquerading as Infrastructure Reform

By Peter Roff

The beginning of the Obama Administration was marked by a trillion dollar experiment called economic stimulus. All we really have to show for it is a lesson learned in crony capitalism. It wasn't the jobs or projects that were shovel ready as promised. It was the insiders, who benefited financially from their political contacts.

The incoming Trump Administration gives us a chance for a new take on infrastructure. He reportedly has in mind a nearly trillion dollar infrastructure improvement program to fix roads and bridges, upgrade airports and rail, modernize port facilities, and undertake other public works projects that are government's responsibility. In the 19th century the great Henry Clay called them "national improvements."

This is not Obama-style economic stimulus, even if these projects have the added benefit of putting people to work, getting the economy moving, and are long term investments in helping our commercial republic grow and prosper. Increasingly, some of these projects in the private sector want to utilize powers reserved to the government to clear the way for them ---- another form of crony capitalism.

The Texas Central Railroad ---- a planned, privately-financed high speed rail link that would run between Dallas and Houston, Texas ---- is a perfect example.

The business leaders who would like to travel between the two cities without stopping, going from one downtown to the other without having to bother with the airports, are all for it. Not so much the people whose communities and counties the rail would run without stopping. The project itself is a classic progressive initiative: it serves the special interests at the expense of everyone else while forcing John and Jane Q. Public to eventually foot the bill.

As a result, some of the land owners who are literally in the way have been less than cooperative with Texas Central's attempts to survey private lands, acquire rights of way, and do the prep work necessary to break ground before laying track. Meanwhile, as some analysts and insiders note, the developers will be looking for federal and state loan guarantees that leave taxpayers on the hook if the whole thing goes off the rails.

That the government may not take an individual's property without due process and fair compensation is one of those constitutional protections we must all be on guard to protect. Officials in one Connecticut town seized the homes of residents with the intention of turning them over to a commercial developer, a move that amazingly enough was affirmed by the United States Supreme Court in its controversial Kelo decision.

In a decision widely criticized by property rights advocates the court found community leaders used their power of eminent domain take the homes legitimately since the property, once developed, would produce an increase in property tax revenues for the city. It was, they said, a matter of the common good.

At the time the decision came down critics said it amounted to nothing less than the establishment of a slippery slope, opening the door to every crazy crony capitalist notion politically well-connected developers could conceive. The State of Texas responded with a Constitutional Amendment ---- among the toughest in the nation ---- to protect private property. So far things have held, largely because of the public outcry, but it is indeed a sensible idea to be on guard against slippage. With President-elect Donald J. Trump having campaigned on the need to repair America's crumbling infrastructure, it is even more so.

Despite the law in the state and the public's skepticism, Texas Central has also asked for the authority to act like the government to get around the crossing gates erected by land owners in the ride over counties who don't want the project to go forward. It's asked to be "declared "a railroad, which would give it government-like powers of eminent domain. Last month, a Harris County, Texas court said "No" to this request.

The court found that Texas Central was not a railroad ---- despite its name ---- and as such did not have eminent domain authority and the right to survey private property. It is a private company with no legal right to enter onto private property or to force landowners to sell their property under the threat of eminent domain.

"This is a landmark victory for all Texas landowners. The ruling makes it crystal clear that Texas Central is not a railroad and does not have eminent domain authority. With no legal authority, no money, and no approval to construct, the project is on a train to nowhere." TAHSPR President Kyle Workman said in a release after the decision came down.

The decision itself doesn't carry any weight outside Texas but its important precedent nonetheless. The decision affirms that private companies and the government are separate animals. Private projects are just that, and must factor in the risks involved. Handing to crony capitalists powers like eminent domain would undermine our current conception of property rights in ways even more damaging than Kelo.